Swedish economy to grow strongly in 2011 and 2012, OECD says.

The Swedish economy will show strong growth this year and in 2012, after emerging relatively unscathed from the economic crisis, notably thanks to strong public finances, the OECD said Thursday.

Following growth of 5.2 percent in 2010, Sweden's gross domestic product (GDP) is set to expand 3.9 percent this year and 3.4 percent next year, the Organisation for Economic Co-operation and Development (OECD) said in a report.

Speaking to reporters in Stockholm, OECD Secretary General Angel Gurria called the Swedish economy "as strong as Pippi Longstocking," the legendary children literature's character created by the country's beloved Astrid Lindgren.

"On a broad range of criteria, Sweden did well during the crisis and the economy has now been recovering firmly for some time," the report read.

Unemployment in Sweden, which shot up during the crisis, is set to fall from 8.4 percent in 2010 to 8.0 percent this year and 7.5 percent in 2012, the OECD said.

It recommended that Sweden embrace measures to increase labour market flexibility and policies to encourage unemployed people to seek work again.

Unlike many European countries, Sweden went into the crisis with a budget surplus, and even at the worst of the slump, with a recession of more than 5.0 percent, its public deficit did not go beyond 1.2 percent of GDP, the OECD said.

"In the face of the crisis, Sweden's healthy public finances proved a major asset. Sweden is in a better shape than most OECD countries to face fiscal pressures coming from population ageing," it said.

The OECD praised the Scandinavian country for heading the lessons of its own problems, saying the country "learned the right lessons from the severe banking crisis in the early 1990s."

Much like many Swedish economists, the organisation warned that despite the strong economy, Sweden was, as a small country, very exposed to the economic health of its trading partners.

The OECD praised Sweden's greenhouse gas emission reduction policy but said it should enhance the cost-effectiveness of its climate change policies.

"We have to continue working to improve the workings of the labour market by making it more advantageous to work for low- and medium-range salaries," he said.

"At the same time, the government has to safeguard's Sweden's position of having strong public finances (by) ... protecting and strengthening the methods we are using against financial and banking crises, without those being a burden for public finances."